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ToggleIn the late 1960s, Wall Street faced a seemingly insignificant problem. As securities trading became increasingly popular, trading activity surged, but the infrastructure supporting it remained outdated. Brokers still settled transactions by physically exchanging stock certificates. Messengers crisscrossed Manhattan, delivering envelopes. Back-office offices were piled high with forms. The surge in trading volume was so severe that the U.S. market had to halt trading every Wednesday for six consecutive months to allow firms time to process the backlog of paperwork.
This all eventually escalated into the infamous "document crisis".
Better "errand runners" and more paper documents couldn't solve the problem. Therefore, in 1973, they replaced all liquid assets with a Depository Trust Company (DTC). This company fixed securities and changed the transfer of ownership to book updates rather than the handover of physical stock certificates. The modern U.S. securities market we see and hear today is the result of this decision, evolving through numerous iterations.
Today, DTC holds custody of more than 1.4 million securities, valued at $87.1 trillion, including securities issued in the United States and more than 130 other countries and territories.
We have seen similar narratives in financial history. When an asset class becomes large and popular enough, what sustains its growth is not merely bookkeeping strategies, but fundamentally, trust. After the introduction of Depository Trust Companies (DTCs), ordinary investors no longer needed to worry about ownership, as trust in the central authority's ability to maintain records replaced the need for paper certificates.
The same issue is also emerging in the cryptocurrency space. Over the past two years, cryptocurrency has gained increasing appeal as a mainstream asset in the United States, driven by exchange-traded funds (ETFs) and other forms of investment, such as digital asset bonds.
This development prompted the back-office departments to act swiftly, much like the paperwork crisis of the 1960s gave rise to the DTC (Directed Trading Center).
In cryptocurrency, the "paper" refers to the private key, which is more like a bearer instrument—whoever controls the private key controls the asset. This presents financial institutions with a series of familiar problems: operational control, asset segregation, auditability, bankruptcy issues, governance, and the fact that the loss of a private key is a permanent loss.
Now, a new trust mechanism is being built around these challenges: trust banking licenses. In today's article, I will explain why so many companies are vying for cryptocurrency custody bank licenses.
Franchise Craze
In recent months, the Office of the Comptroller of the Currency (OCC) has been approving and processing a growing number of applications to become a national trust bank associated with digital asset custody and stablecoin infrastructure.
On December 12, 2025, the Office of the Comptroller of the Currency (OCC) conditionally approved five such applications, including conversion applications from Circle's First National Digital Money Bank, Ripple National Trust Bank, and BitGo, Fidelity Digital Assets, and Paxos. Subsequently, Stripe's cryptocurrency division Bridge and Crypto.com received preliminary approval from the OCC in February 2026.
The queue is not limited to native cryptocurrency companies.
Last week, Morgan Stanley, the world's largest wealth management company, applied to establish a trust bank called the Morgan Stanley Digital Trust National Association.
Do you know what these applications have in common? They're not queuing up to become a regular bank, offering deposit and loan services. Unlike regular banks, these national trust banks cannot accept deposits or make loans, and they are not insured by the Federal Deposit Insurance Corporation (FDIC). They are applying to provide custody, safekeeping, and trust management services. You can think of it as a bookkeeping service specifically for crypto assets.
I believe this is one of the clearest signs that cryptocurrencies are changing how traditional financial institutions operate, while the rest of the world is busy focusing on the volatility of cryptocurrency prices.
Banking licenses may sound dry and uninteresting, but like many other financial infrastructure innovations, they bring to the forefront the lessons the financial world learned from the paperwork crisis. This also underscores the crucial role of custody and control in the mainstreaming of cryptocurrencies.
Why now?
The surge in license applications is closely linked to the recent clarification by the Office of the Comptroller of the Currency (OCC) regarding the licensing authority of national banks in cryptocurrency-related custody businesses. In May 2025, the OCC confirmed that national banks and federal savings associations can buy and sell assets under their custody according to customer instructions.
In December 2025, the agency also confirmed that banks could conduct “risk-free principal” cryptocurrency transactions without holding inventory by acting as intermediaries.
Last week, on February 27, 2026, the Office of the Comptroller of the Currency (OCC) clarified that, starting April 1, 2026, National Trust Banks could engage in non-trustee activities that go beyond their narrow fiduciary responsibilities.
Why is this important? This is crucial if you are a company that provides custody, settlement, reserve management and related services.
We've seen similar situations in the financial world before.
In the early 2010s, a new type of bank emerged as a group of fintech companies developed apps based on partner banks. While these apps made banking more convenient, they also presented some problems. Although the apps had user interfaces, the partner banks still controlled deposits, infrastructure, and regulatory licenses. This resulted in confusion as responsibility was spread across multiple entities when problems arose.
The approach back then was similar to what we're seeing in the cryptocurrency space now: managing risk and reward.
In 2016, the Office of the Comptroller of the Currency (OCC) began exploring the issuance of special purpose national banking licenses for fintech companies. Two years later, the OCC began accepting license applications from non-deposit-taking fintech companies engaged in core banking operations.
Despite the courts rejecting the possibility of issuing banking licenses to non-depository institutions, fintech companies continued to reduce their reliance on partner banks. Subsequently, a few fintech companies transformed into full-service banks through traditional, more cumbersome pathways (sometimes including acquisitions).
Varo, originally a fintech company, obtained a full-service national banking license in 2020. Jiko transformed into a bank by acquiring a small national bank. SoFi received conditional approval in 2022 to become a full-service national bank by acquiring an existing national bank.
The national trust bank license boom we're seeing today follows a similar pattern, except this time, Washington is also developing a new set of safeguards for digital assets.
The legislative context behind all these developments makes it clearer why companies applying for National Trust Bank licenses are not only pursuing custody services in the digital asset sector.
In July 2025, US President Donald Trump signed the GENIUS Act, establishing a federal framework for payments of stablecoins. Several companies seeking a trust banking structure have made it clear that they plan to conduct stablecoin and related reserve business within the federal regulatory framework provided by the Act.
Both Bridge and Circle mentioned this in their respective announcements.
This answers the first level of the question, "Why now?" The clarification of regulatory policies has opened up new value chains for existing businesses, including traditional and cryptocurrency-native companies, enabling them to expand their operations.
The second level involves market structure.
Institutional investment in cryptocurrencies has shifted towards vehicles similar to traditional financial products, such as ETFs, funds, and managed accounts. These vehicles require custodian institutions that meet legal and operational requirements.
If you think there's no longer a demand for centralized cryptocurrency investment, you're sorely mistaken. The current development of cryptocurrency ETF infrastructure is a prime example of this.
In April 2025, BlackRock, the world's largest asset and crypto fund manager, added Anchorage Digital Bank as a Bitcoin custodian, in addition to Coinbase, its existing partner for the iShares Bitcoin Trust. BlackRock stated that this move was part of "ongoing risk management" aimed at meeting the growing needs of retail and institutional investors.
What value do financial giants like Morgan Stanley, with a market capitalization of $9 trillion, see in these charters?
One recent indication came from a fireside chat at the Enterprise Bitcoin conference less than two weeks ago. At the time, Strategy (formerly MicroStrategy) CEO Phong Le stated, "If anyone can help the world 'take the orange pill,' it's Morgan Stanley." Morgan Stanley's head of digital asset strategy, Amy Oldenburg, responded, "That's probably accurate."
What changes have occurred?
Once you connect these developments, the trust license craze no longer resembles the story of cryptocurrency, but rather an evolution we've seen in the development of DTCs.
As cryptocurrencies gradually evolve into a financial asset, both retail and institutional investors need a place to store their private keys, and this place must be accredited by lawyers, auditors, and regulators. Establishing national trust bank licenses is one way to address this issue on a large scale.
Next comes the question of the business line's profitability. The custody service appears to have low fees. Starting in Q1 2025, Coinbase stopped disclosing custody fee revenue as a separate item, instead including it in "Other Subscription and Services Revenue." However, the custody business is far more complex than it seems.
Whoever controls the custody rights controls the collateral, which in turn determines these institutions' financing capabilities. Financing determines leverage, which in turn determines trading volume. Ultimately, trading volume determines returns.
Global securities lending revenue is projected to reach $15.3 billion in 2025, with outstanding loans exceeding $4 trillion. Custodian giant State Street reported total revenue of $13.94 billion in 2025. Of this, approximately 40% ($5.32 billion) will come from services, including custody, accounting and fund management, records storage, and client reporting.
Therefore, while hosting services alone may not generate substantial revenue, ancillary services surrounding hosting services can generate repeatable revenue streams.
DTCs have become indispensable because they enable markets to scale without being overwhelmed by cumbersome paperwork. Today, DTCs have evolved into comprehensive systems that go far beyond mere custody; they also offer settlement services, process corporate actions, and support underwriting. This has created a complete ecosystem built around updating ownership records.
Obtaining a cryptocurrency custody license can offer similar benefits to these applicants. In addition to becoming a vault, they can also provide an authorized ledger interface.
This license enables these institutions to provide credibility to their clients in recording, segregating, transferring, and auditing ownership of digital assets. They can achieve this through a leaner balance sheet and a more focused approach, without needing to become deposit-taking banks.
However, trust licenses also have many critics.
Supporters of traditional banking argue that these licenses could serve as a "backdoor" into the banking system, bypassing the need to accept deposits or assume the same broad public obligations. Banks are currently arguing over the delineation of these boundaries.
While the debate continues, regulatory changes have already begun. The conditional approval from the Office of the Comptroller of the Currency (OCC) may not be final, but it sends an important message: despite the self-custody principle, cryptocurrencies have grown large enough to underscore the importance of back-office operations.
I believe it would be a grave mistake for industry insiders to label the surge in trust bank license applications as a phenomenon within the cryptocurrency industry. It's more accurately described as a natural evolution of market participants seeking to create value by addressing industry inefficiencies.
